The Hughes administration, under intense public and legislative pressure to release deposits from crippled thrift associations, has ordered managers of Old Court Savings & Loan to raise $50 million by Friday to ease some customer hardships, government and industry sources said today.
Gov. Harry Hughes told reporters today that he expects the Maryland Deposit Insurance Fund (MDIF), the state agency that controls Old Court, to devise rules for hardship withdrawals by late next week. He also announced that a companion set of rules will allow special withdrawals from Community Savings and Loan, another thrift that has not allowed depositors access to their savings.
The announcement of the withdrawal rules may coincide with the start of a special session of the General Assembly, which is scheduled to consider the administration's proposed sale of another troubled thrift, Merritt Commercial Savings and Loan, to the giant New York-based Chase Manhattan Corp.
Key members of the legislature, who raised pointed questions today about major elements of Hughes' tentative agreement with Chase, have made a plan for hardship withdrawals a prerequisite to their passage of legislation approving the Merritt sale.
Accounts have been frozen at Old Court, Merritt, Community and First Maryland Savings and Loan following the industry crisis last May. Negotiations are under way for the acquisition of Merritt and First Maryland with large out-of-state banks, a move that would allow depositors access to their money. But depositors at Old Court and Community have been putting increased pressure on government officials to find a way for them to begin withdrawing their savings, too.
Depositors at Old Court have had no access to their money since mid-May, and Community customers have been barred from making withdrawals for more than a month.
Sources familiar with the internal workings of Old Court, which is now being managed by accountants from Chevy Chase Savings and Loan, said that in recent weeks Chevy Chase has raised roughly $16 million toward the $50 million goal. The funds have come through the sale of several Old Court properties in the Baltimore area, including a small shopping center, several housing lots and other commercial joint ventures, as well as by the routine collection of mortgage payments and the sale of some Old Court loans, the sources said.
At a news conference today, Hughes said the cash reserves at the Baltimore association were so depleted that only persons suffering "extreme" hardships will be able to withdraw money, for such emergencies as critical medical or nursing home care, funeral expenses, or to avoid mortgage foreclosures.
Hughes also said MDIF is working on a plan to allow special withdrawals at Community. Thrift industry sources said Community's managers, like those at Old Court, are trying to set aside millions of dollars to make a limited number of withdrawals possible.
Hughes, who will meet with Thursday with leaders of a depositors' group, ruled out the possibilty of unlimited withdrawals at Community and Old Court, saying he must protect the interests of all Maryland taxpayers.
"The legislature, by a single vote, could bail out everyone who suffered by telling every Maryland taxpayer to dig in deep and pay the bill," the governor said. "But that's like asking your neighbor to buy the used car you bought that doesn't run."
Hughes' plan to sell Merritt is being greeted with some skepticism here because it requires the state to pay $25 million to Chase from a savings and loan insurance fund.
Hughes' staff offered a somewhat clearer picture of the severity of the state's thrift crisis today with the release of new data showing that 74 savings and loans lost a total of more $516 million in assets between April and September of this year.
Hughes' statements today marked his first public defense of the prospective deal with Chase Manhattan and followed complaints from state Senate leaders that the governor had failed to campaign personally for the Merritt sale.
"We don't want to hear just from the monkeys, we want to hear from the organ grinder, too," said Thomas V. Mike Miller Jr. (D-Prince George's).
Also yesterday, Norm Silverstein, MDIF spokesman, said Columbian Building Association of Havre de Grace and Sterling Savings Association of Pikesville have been granted full federal insurance.